Plaintiffs Claim AME Church Plan Is Subject to ERISA

Members of the African Methodist Episcopal Church have filed a consolidated class action complaint alleging retirement plan fiduciary breaches under the Employee Retirement Income Security Act.

The complaint follows a proposed class action lawsuit against named plan fiduciaries that was filed earlier this year. The lawsuit alleges fiduciary breach charges against the defendants, the African Methodist Episcopal Church Ministerial Retirement Annuity Plan; the third-party administrator of the plan, Newport Group; Symetra Life Insurance Company; and Reverend Jerome Harris, the executive director of the AMEC Department of Retirement Services from 2000 until June 2021, among others.

“For nearly two decades, defendants breached their fiduciary duties and engaged in negligent conduct—permitting a single individual to exercise unsupervised control in managing the African Methodist Episcopal Church Ministerial Retirement Annuity Plan and the fund of retirement assets associated with the plan,” the complaint states. “Defendant Harris made a series of self-dealing, illegal, and/or risky investments without any oversight from the African Methodist Episcopal Church and its ministers.”

The defendants are being sued for breach of contract, breach of fiduciary duty, negligence and unjust enrichment, among other allegations.

“Plaintiffs bring this class action on behalf of AMEC ministers and other employees who, as a result of defendants’ catastrophic failures to protect their retirement accounts in the plan, collectively lost tens of millions of dollars in career retirement savings,” the complaint states.

ERISA or Not ERISA?

At issue in the lawsuit is the AMEC 401(k) retirement plan for eligible employees. The church 401(k) plan was established in 2003 for eligible employees who wished to contribute savings for their retirement, the complaint states.

In 2005, AMEC consolidated various governing documents of three retirement plans into a single 401(k) plan, the Ministerial Annuity Plan of the African Methodist Episcopal Church sponsored by AMEC. Earlier iterations had established three retirement plan levels.

Per IRS rules, church plans are often not subject to rules and regulations under ERISA.

According to the IRS, “A plan that meets the definition of a church plan in IRC Section 414(e) is exempt from certain requirements imposed on other tax-qualified retirement plans under the Internal Revenue Code. However, a church plan sponsor can elect under IRC Section 410(d) to have the plan treated as though it were not an exempt church plan.”

The complaint similarly states, “As a church plan, the plan is exempted from ERISA unless it affirmatively elected to be governed by ERISA.”

Plaintiffs allege that the church plan is an ERISA plan because the summary plan document clearly states that it is. They further allege that the AMEC 401(k) retirement summary plan document—located on the church’s website for church employees—is the only summary plan description issued by AMEC.

“On its first page, the plan’s SPD declares that ‘the plan is subject to federal laws, such as ERISA (the Employee Retirement Income Security Act),’” the complaint states. “In addition, the Summary Plan Description, as well as other written communications to the church’s clergy and other employees, including the Church’s Doctrine and Discipline—published every four years to provide clergy and church members updated information on church beliefs, teachings and practices—all expressly state that the plan is an ERISA plan, and is to be operated in full compliance with ERISA.”

The consolidated class action complaint was filed in the U.S. District Court for the Western District of Tennessee. A request for comment to the AMEC Department of Retirement Services was not returned.